Ventas, Inc. : Ventas Reports 21 Percent Increase in First Quarter 2012 Normalized FFO to $0.91 Per Diluted Share
04/27/2012| 07:05am US/Eastern
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Cogdell Spencer Acquisition Completed in Second Quarter
Ventas, Inc. (NYSE: VTR) ("Ventas" or the "Company") said today that
normalized Funds From Operations ("FFO") for the quarter ended March 31,
2012 increased approximately 118 percent to $263.9 million, from $121.0
million for the comparable 2011 period. Normalized FFO per diluted
common share was $0.91 for the quarter ended March 31, 2012, a 21
percent increase from $0.75 for the comparable 2011 period. Weighted
average diluted shares outstanding for the period rose by 80 percent to
290.8 million, compared to 162.0 million in the first quarter of 2011.
"Ventas continues to reap the benefits from executing on our strategy of
growing and diversifying our portfolio, increasing private pay and
strengthening our balance sheet as we delivered outstanding first
quarter results," Ventas Chairman and Chief Executive Officer Debra A.
Cafaro said. "In the last year we have grown the private pay portion of
our business to 80 percent of revenues, more than doubled the number of
properties in our portfolio and expanded our tenant operator
relationships by four times, while improving our ratings and our cost of
capital. We have proven that a great company can produce superior
consistent returns while prudently managing its balance sheet," she
added. "We will continue to take advantage of the powerful platform we
have created."
The first quarter's substantial growth is primarily due to the Company's
2011 acquisitions, including Nationwide Health Properties, Inc. ("NHP")
and properties managed by Atria Senior Living, Inc. ("Atria"), increased
net operating income from the Company's seniors housing communities
managed by Sunrise Senior Living, Inc. (NYSE: SRZ) ("Sunrise"), and
rental increases from the Company's triple-net lease portfolio. These
were partially offset by increases in general and administrative
expenses, higher total interest expense and a substantial increase in
weighted average diluted shares outstanding.
The Company also recognized a gain of $40.2 million in the first quarter
of 2012 from the sale of real estate assets, which gain is excluded from
both normalized FFO and NAREIT FFO (as defined below).
Normalized FFO for the quarter ended March 31, 2012 excludes the net
expense (totaling $49.1 million, or $0.17 per diluted share) from loss
on extinguishment of debt, non-cash income tax expense, merger-related
expenses and deal costs (including integration costs), mark-to-market
adjustment for derivatives and amortization of other intangibles.
Normalized FFO for the quarter ended March 31, 2011 excluded the net
expense (totaling $20.0 million, or $0.12 per diluted share) from
merger-related expenses and deal costs (including integration costs),
loss on extinguishment of debt and amortization of other intangibles,
offset by income tax benefit.
Net income attributable to common stockholders for the quarter ended
March 31, 2012 was $90.6 million, or $0.31 per diluted common share,
including discontinued operations of $42.3 million, compared with net
income attributable to common stockholders for the quarter ended March
31, 2011 of $49.0 million, or $0.30 per diluted common share, including
discontinued operations of $0.8 million. This increase in net income
attributable to common stockholders is primarily the result of the
Company's 2011 acquisitions and a gain on sale of real estate assets of
$40.2 million, partially offset by higher merger-related expenses and
deal costs (including integration costs) and loss on extinguishment of
debt.
FFO, as defined by the National Association of Real Estate Investment
Trusts ("NAREIT"), for the quarter ended March 31, 2012 increased 113
percent to $214.8 million, from $101.0 million in the comparable 2011
period. NAREIT FFO per diluted common share for the quarter ended March
31, 2012 increased 19 percent to $0.74, from $0.62 in 2011. This
increase is primarily due to the factors described above for net income.
PRIVATE PAY SENIORS HOUSING OPERATING PORTFOLIO
First Quarter 2012 Total Portfolio NOI and Stabilized Occupancy
Trend Positively
At March 31, 2012, the Company's seniors housing operating portfolio
included 79 private pay seniors housing communities managed by Sunrise
and 119 private pay seniors housing communities managed by Atria. Of
these 198 assets, 196 were owned by the Company for the full fourth
quarter of 2011 and first quarter of 2012 ("same-store").
Same-store Net Operating Income ("NOI") before management fees for the
196 same-store communities increased 3.8 percent in the first quarter of
2012 versus the fourth quarter of 2011, from $101.6 million to $105.4
million. Same-store NOI after management fees increased sequentially by
0.9 percent, from $89.3 million in the fourth quarter of 2011 to $90.1
million in the first quarter of 2012. The management fee expense for the
Sunrise portfolio reverted to its contractual level of 6 percent of
revenues in the first quarter of 2012, from its temporary rate of 3.75
percent in the fourth quarter of 2011, resulting in a $2.7 million
management fee expense increase.
FIRST QUARTER HIGHLIGHTS AND OTHER RECENT DEVELOPMENTS
Portfolio, Performance and Balance Sheet Highlights
Investments and Dispositions
As previously announced, on April 2, Ventas completed the acquisition
of Cogdell Spencer Inc. ("Cogdell") and its 72 high-quality medical
office buildings ("MOBs"). With this acquisition, Ventas is now the
largest owner of MOBs in the U.S. with over 21 million square feet of
owned and managed properties.
As previously announced, Ventas entered into a definitive agreement to
acquire 16 high-quality, private pay seniors living communities
managed by Sunrise for $362 million. The acquisition is expected to
close in the second quarter of 2012 and be immediately accretive.
However, there can be no assurance as to whether or when the
transaction will close.
In the first quarter of 2012, Ventas invested over $56 million,
including the assumption of $16.5 million in debt, in one MOB and one
seniors housing community.
As previously announced, during the first quarter of 2012, Ventas sold
nine assets for total consideration of $121.3 million, including lease
termination fees, and recognized a gain of $40.2 million.
Liquidity, Ratings and Balance Sheet
In February 2012, the Company issued and sold $600.0 million aggregate
principal amount of 4.25 percent senior notes due 2022, and in March
2012, the Company redeemed all $200.0 million principal amount
outstanding of its 6½ percent senior notes due 2016. The Company
recognized a loss on extinguishment of debt of $29.7 million in the
first quarter of 2012.
In April 2012, the Company issued and sold $600.0 million aggregate
principal amount of 4.00 percent senior notes due 2019 and called
$225.0 million principal amount of its 6¾ percent senior notes due
2017 for redemption. Ventas expects to recognize a loss on
extinguishment of debt of approximately $10 million in the second
quarter of 2012.
The Company currently has approximately $1.9 billion of borrowing
capacity available under its unsecured revolving credit facility and
approximately $25 million in cash and cash equivalents.
At March 31, 2012, the Company had $73 million of borrowings
outstanding under its unsecured revolving credit facility,
approximately $500 million of borrowings outstanding under its
unsecured term loan facility, and $53 million of cash and cash
equivalents.
The Company's debt to total capitalization at March 31, 2012 was
approximately 28 percent.
The Company's net debt to Adjusted Pro Forma EBITDA (as defined
herein) at March 31, 2012 was 4.7x.
Portfolio & Additional Information
The 197 skilled nursing facilities ("SNFs") and long-term acute care
hospitals ("LTACs") master leased by the Company to Kindred
Healthcare, Inc. (NYSE: KND) ("Kindred") produced EBITDARM (earnings
before interest, taxes, depreciation, amortization, rent and
management fees) to actual cash rent coverage of 2.1x for the trailing
12-month period ended December 31, 2011 (the latest date available).
Kindred has irrevocably renewed three renewal groups comprising 25
assets and $46 million of current annual base rent. The remaining
seven renewal groups whose lease term will expire on April 30, 2013
comprise 64 assets and $77 million of current annual base rent,
representing approximately 5 percent of Ventas NOI. A comprehensive
plan to lease these 64 licensed assets to qualified healthcare
operators is currently underway.
"Same-store" cash NOI growth for the Company's total portfolio was 3.5
percent in the first quarter of 2012, compared to the first quarter of
2011. The comparable 2011 period included the benefit to NOI of the
3.75 percent temporary Sunrise management fee; assuming a constant
Sunrise management fee percentage, the growth rate was over 5 percent.
On April 24, 2012, the Centers for Medicare & Medicaid Services
("CMS") published its proposed Medicare reimbursement updates for
LTACs. CMS estimates that total LTAC Medicare payments will increase
1.9 percent. The proposed rule is subject to a 60-day comment period.
VENTAS CONFIRMS 2012 NORMALIZED FFO PER DILUTED SHARE GUIDANCE OF
$3.63 TO $3.69
Ventas currently expects its 2012 normalized FFO per diluted share to
range between $3.63 and $3.69, excluding the impact of future
acquisitions, divestitures and capital transactions, but including the
impact of the Cogdell acquisition.
The Company's normalized FFO guidance (and related GAAP earnings
projections) for all periods assumes that all of the Company's tenants
and borrowers continue to meet all of their obligations to the Company.
In addition, the Company's normalized FFO guidance excludes (a) gains
and losses on the sales of real property assets, (b) merger-related
costs and expenses, including amortization of intangibles and transition
and integration expenses, and deal costs and expenses, (c) the impact of
any expenses related to asset impairment and valuation allowances, the
write-off of unamortized deferred financing fees, or additional costs,
expenses, discounts, make-whole payments, penalties or premiums incurred
as a result of early retirement or payment of the Company's debt, (d)
the non-cash effect of income tax benefits or expenses and derivative
transactions that have non-cash mark-to-market impacts on the Company's
income statement, (e) the impact of future acquisitions or divestitures
(including pursuant to tenant options to purchase) and capital
transactions, and (f) the financial impact of contingent consideration.
The Company's guidance is based on a number of other assumptions, which
are subject to change and many of which are outside the control of the
Company. If actual results vary from these assumptions, the Company's
expectations may change. There can be no assurance that the Company will
achieve these results.
A reconciliation of the Company's guidance to the Company's projected
GAAP earnings is attached to this press release. The Company may from
time to time update its publicly announced guidance, but it is not
obligated to do so.
FIRST QUARTER CONFERENCE CALL
Ventas will hold a conference call to discuss this earnings release
today, at 12:00 p.m. Eastern Time (11:00 a.m. Central Time). The dial-in
number for the conference call is (617) 597-5493. The participant
passcode is "Ventas." The conference call is being webcast live by
Thomson Reuters and can be accessed at the Company's website at www.ventasreit.com
or www.earnings.com.
A replay of the webcast will be available today online, or by calling
(617) 801-6888, passcode 10270191, beginning at approximately 2:00 p.m.
Eastern Time and will be archived for 30 days.
Ventas, Inc., an S&P 500 company, is a leading healthcare real estate
investment trust. Its diverse portfolio of more than 1,400 assets in 47
states (including the District of Columbia) and two Canadian provinces
consists of seniors housing communities, skilled nursing facilities,
hospitals, medical office buildings and other properties. Through its
Lillibridge subsidiary, Ventas provides management, leasing, marketing,
facility development and advisory services to highly rated hospitals and
health systems throughout the United States. More information about
Ventas and Lillibridge can be found at www.ventasreit.com
and www.lillibridge.com.
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements regarding the Company's or its tenants', operators',
managers' or borrowers' expected future financial condition, results of
operations, cash flows, funds from operations, dividends and dividend
plans, financing opportunities and plans, capital markets transactions,
business strategy, budgets, projected costs, operating metrics, capital
expenditures, competitive positions, acquisitions, investment
opportunities, dispositions, merger integration, growth opportunities,
expected lease income, continued qualification as a real estate
investment trust ("REIT"), plans and objectives of management for future
operations and statements that include words such as "anticipate," "if,"
"believe," "plan," "estimate," "expect," "intend," "may," "could,"
"should," "will" and other similar expressions are forward-looking
statements. Such forward-looking statements are inherently uncertain,
and actual results may differ from the Company's expectations. The
Company does not undertake a duty to update such forward-looking
statements, which speak only as of the date on which they are made.
The Company's actual future results and trends may differ materially
from expectations depending on a variety of factors discussed in the
Company's filings with the Securities and Exchange Commission. These
factors include without limitation: (a) the ability and willingness of
the Company's tenants, operators, borrowers, managers and other third
parties to satisfy their obligations under their respective contractual
arrangements with the Company, including, in some cases, their
obligations to indemnify, defend and hold harmless the Company from and
against various claims, litigation and liabilities; (b) the ability of
the Company's tenants, operators, borrowers and managers to maintain the
financial strength and liquidity necessary to satisfy their respective
obligations and liabilities to third parties, including without
limitation obligations under their existing credit facilities and other
indebtedness; (c) the Company's success in implementing its business
strategy and the Company's ability to identify, underwrite, finance,
consummate and integrate diversifying acquisitions and investments,
including its recent acquisition of Cogdell Spencer Inc. and those in
different asset types and outside the United States; (d) macroeconomic
conditions such as a disruption of or lack of access to the capital
markets, changes in the debt rating on U.S. government securities,
default or delay in payment by the United States of its obligations, and
changes in the federal budget resulting in the reduction or nonpayment
of Medicare or Medicaid reimbursement rates; (e) the nature and extent
of future competition; (f) the extent of future or pending healthcare
reform and regulation, including cost containment measures and changes
in reimbursement policies, procedures and rates; (g) increases in the
Company's borrowing costs as a result of changes in interest rates and
other factors; (h) the ability of the Company's operators and managers,
as applicable, to comply with laws, rules and regulations in the
operation of the Company's properties, to deliver high quality services,
to attract and retain qualified personnel and to attract residents and
patients; (i) changes in general economic conditions and/or economic
conditions in the markets in which the Company may, from time to time,
compete, and the effect of those changes on the Company's revenues,
earnings and funding sources; (j) the Company's ability to pay down,
refinance, restructure or extend its indebtedness as it becomes due; (k)
the Company's ability and willingness to maintain its qualification as a
REIT due to economic, market, legal, tax or other considerations; (l)
final determination of the Company's taxable net income for the year
ended December 31, 2011 and the year ending December 31, 2012; (m) the
ability and willingness of the Company's tenants to renew their leases
with the Company upon expiration of the leases, the Company's ability to
reposition its properties on the same or better terms in the event of
nonrenewal or in the event the Company exercises its right to replace an
existing tenant upon default, and obligations, including indemnification
obligations, the Company may incur in connection with the replacement of
an existing tenant upon expiration or termination of its leases; (n)
risks associated with the Company's senior living operating portfolio,
such as factors that can cause volatility in the Company's operating
income and earnings generated by those properties, including without
limitation national and regional economic conditions, costs of food,
materials, energy, labor and services, employee benefit costs, insurance
costs and professional and general liability claims, and the timely
delivery of accurate property-level financial results for those
properties; (o) changes in U.S. and Canadian exchange rates; (p)
year-over-year changes in the Consumer Price Index and the effect of
those changes on the rent escalators contained in the Company's leases,
including the rent escalator for Master Lease 2 with Kindred, and the
Company's earnings; (q) the Company's ability and the ability of its
tenants, operators, borrowers and managers to obtain and maintain
adequate property, liability and other insurance from reputable,
financially stable providers; (r) the impact of increased operating
costs and uninsured professional liability claims on the liquidity,
financial condition and results of operations of the Company's tenants,
operators, borrowers and managers, and the ability of the Company's
tenants, operators, borrowers and managers to accurately estimate the
magnitude of those claims; (s) risks associated with the Company's MOB
portfolio and operations, including its ability to successfully design,
develop and manage MOBs, to accurately estimate its costs in fixed
fee-for-service projects and to retain key personnel; (t) the ability of
the hospitals on or near whose campuses the Company's MOBs are located
and their affiliated health systems to remain competitive and
financially viable and to attract physicians and physician groups; (u)
the Company's ability to build, maintain and expand its relationships
with existing and prospective hospital and health system clients; (v)
risks associated with the Company's investments in joint ventures and
unconsolidated entities, including its lack of sole decision-making
authority and its reliance on its joint venture partners' financial
condition; (w) the impact of market or issuer events on the liquidity or
value of the Company's investments in marketable securities; and (x) the
impact of litigation or any financial, accounting, legal or regulatory
issues that may affect the Company or its tenants, operators, borrowers
or managers.Many of these factors are beyond the control of the
Company and its management.
CONSOLIDATED BALANCE SHEETS
As of March 31, 2012, December 31, 2011, September 30, 2011, June
30, 2011 and March 31, 2011
(In thousands, except per share amounts)
March 31,
December 31,
September 30,
June 30,
March 31,
2012
2011
2011
2011
2011
Assets
Real estate investments:
Land and improvements
$
1,616,947
$
1,614,847
$
1,584,842
$
854,055
$
560,086
Buildings and improvements
15,329,730
15,337,919
15,289,744
8,969,465
6,051,148
Construction in progress
85,418
76,638
60,978
41,240
5,848
Acquired lease intangibles
799,136
800,858
821,613
317,850
147,381
17,831,231
17,830,262
17,757,177
10,182,610
6,764,463
Accumulated depreciation and amortization
(2,084,212
)
(1,916,530
)
(1,761,135
)
(1,601,662
)
(1,521,039
)
Net real estate property
15,747,019
15,913,732
15,996,042
8,580,948
5,243,424
Secured loans receivable, net
222,218
212,577
302,264
634,472
130,608
Investments in unconsolidated entities
106,086
105,303
119,322
14,765
15,011
Net real estate investments
16,075,323
16,231,612
16,417,628
9,230,185
5,389,043
Cash and cash equivalents
53,224
45,807
57,482
26,702
41,899
Escrow deposits and restricted cash
114,420
76,590
84,783
64,261
35,399
Deferred financing costs, net
26,601
26,669
12,424
16,129
17,141
Other assets
919,391
891,232
633,453
296,756
210,616
Total assets
$
17,188,959
$
17,271,910
$
17,205,770
$
9,634,033
$
5,694,098
Liabilities and equity
Liabilities:
Senior notes payable and other debt
$
6,430,364
$
6,429,116
$
6,313,141
$
5,007,080
$
2,571,368
Accrued interest
58,041
37,694
65,985
26,558
34,543
Accounts payable and other liabilities
1,060,647
1,085,597
1,128,706
401,151
203,594
Deferred income taxes
271,408
260,722
274,852
279,668
238,146
Total liabilities
7,820,460
7,813,129
7,782,684
5,714,457
3,047,651
Redeemable OP unitholder interests
106,264
102,837
92,817
-
-
Commitments and contingencies
Equity:
Ventas stockholders' equity:
Preferred stock, $1.00 par value; 10,000 shares authorized,
unissued
-
-
-
-
-
Common stock, $0.25 par value; 289,027, 288,823, 287,962, 188,106
and 163,118 shares issued at March 31, 2012, December 31, 2011,
September 30, 2011, June 30, 2011 and March 31, 2011, respectively
72,273
72,240
72,025
47,063
40,818
Capital in excess of par value
9,591,880
9,593,583
9,595,495
4,254,137
2,874,879
Accumulated other comprehensive income
23,926
22,062
19,237
28,212
28,097
Retained earnings (deficit)
(500,808
)
(412,181
)
(439,015
)
(412,694
)
(300,382
)
Treasury stock, 10,14, 37, 0 and 0 shares at March 31, 2012,
December 31, 2011, September 30, 2011, June 30, 2011 and March 31,
2011, respectively
(536
)
(747
)
(1,980
)
-
(8
)
Total Ventas stockholders' equity
9,186,735
9,274,957
9,245,762
3,916,718
2,643,404
Noncontrolling interest
75,500
80,987
84,507
2,858
3,043
Total equity
9,262,235
9,355,944
9,330,269
3,919,576
2,646,447
Total liabilities and equity
$
17,188,959
$
17,271,910
$
17,205,770
$
9,634,033
$
5,694,098
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2012 and 2011
(In thousands, except per share amounts)
2012
2011
Revenues:
Rental income:
Triple-net leased
$
209,509
$
116,574
Medical office buildings
64,696
24,236
274,205
140,810
Resident fees and services
285,795
114,502
Medical office building and other services revenue
5,608
6,957
Income from loans and investments
8,036
6,085
Interest and other income
50
78
Total revenues
573,694
268,432
Expenses:
Interest
70,668
41,740
Depreciation and amortization
163,197
51,314
Property-level operating expenses:
Senior living
195,666
78,111
Medical office buildings
21,090
8,676
216,756
86,787
Medical office building services costs
2,988
5,536
General, administrative and professional fees
22,200
14,832
Loss on extinguishment of debt
29,544
16,520
Merger-related expenses and deal costs
7,981
6,449
Other
1,576
1
Total expenses
514,910
223,179
Income before income/loss from unconsolidated entities, income
taxes, discontinued operations and noncontrolling interest
58,784
45,253
Income (loss) from unconsolidated entities
317
(170
)
Income tax (expense) benefit
(11,338
)
3,197
Income from continuing operations
47,763
48,280
Discontinued operations
42,329
766
Net income
90,092
49,046
Net (loss) income attributable to noncontrolling interest
(534
)
62
Net income attributable to common stockholders
$
90,626
$
48,984
Earnings per common share:
Basic:
Income from continuing operations attributable to common
stockholders
$
0.17
$
0.30
Discontinued operations
0.14
0.01
Net income attributable to common stockholders
$
0.31
$
0.31
Diluted:
Income from continuing operations attributable to common
stockholders
$
0.17
$
0.30
Discontinued operations
0.14
0.00
Net income attributable to common stockholders
$
0.31
$
0.30
Weighted average shares used in computing earnings per common
share:
Basic
288,375
160,420
Diluted
290,813
162,023
Dividends declared per common share
$
0.62
$
0.575
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
2012 First
2011 Quarters
Quarter
Fourth
Third
Second
First
Revenues:
Rental income:
Triple-net leased
$
209,509
$
208,607
$
206,803
$
118,099
$
116,574
Medical office buildings
64,696
60,577
58,361
23,758
24,236
274,205
269,184
265,164
141,857
140,810
Resident fees and services
285,795
277,992
274,294
201,307
114,502
Medical office building and other services revenue
5,608
10,421
9,271
9,822
6,957
Income from loans and investments
8,036
9,867
10,072
8,391
6,085
Interest and other income
50
688
373
78
78
Total revenues
573,694
568,152
559,174
361,455
268,432
Expenses:
Interest
70,668
70,037
71,697
52,917
41,740
Depreciation and amortization
163,197
163,692
158,341
80,046
51,314
Property-level operating expenses:
Senior living
195,666
188,790
187,356
135,894
78,111
Medical office buildings
21,090
20,304
20,260
8,278
8,676
216,756
209,094
207,616
144,172
86,787
Medical office building services costs
2,988
7,245
6,347
7,954
5,536
General, administrative and professional fees
22,200
23,527
20,624
15,554
14,832
Loss on extinguishment of debt
29,544
2,393
8,685
6
16,520
Litigation proceeds, net
-
(116,932
)
(85,327
)
-
-
Merger-related expenses and deal costs
7,981
22,317
69,350
55,807
6,449
Other
1,576
1,443
13,882
(8,056
)
1
Total expenses
514,910
382,816
471,215
348,400
223,179
Income before income/loss from unconsolidated entities, income
taxes, discontinued operations and noncontrolling interest
58,784
185,336
87,959
13,055
45,253
Income (loss) from unconsolidated entities
317
19
182
(83
)
(170
)
Income tax (expense) benefit
(11,338
)
7,622
13,732
6,110
3,197
Income from continuing operations
47,763
192,977
101,873
19,082
48,280
Discontinued operations
42,329
(480
)
111
652
766
Net income
90,092
192,497
101,984
19,734
49,046
Net (loss) income attributable to noncontrolling interest
(534
)
(451
)
(901
)
58
62
Net income attributable to common stockholders
$
90,626
$
192,948
$
102,885
$
19,676
$
48,984
Earnings per common share:
Basic:
Income from continuing operations attributable to common stockholders
$
0.17
$
0.67
$
0.36
$
0.11
$
0.30
Discontinued operations
0.14
(0.00
)
0.00
0.00
0.01
Net income attributable to common stockholders
$
0.31
$
0.67
$
0.36
$
0.11
$
0.31
Diluted:
Income from continuing operations attributable to common stockholders
$
0.17
$
0.66
$
0.35
$
0.11
$
0.30
Discontinued operations
0.14
(0.00
)
0.00
0.00
0.00
Net income attributable to common stockholders
$
0.31
$
0.66
$
0.35
$
0.11
$
0.30
Weighted average shares used in computing earnings per common
share:
Basic
288,375
287,793
287,365
176,262
160,420
Diluted
290,813
290,607
290,794
177,945
162,023
Dividends declared per common share
$
0.62
$
0.575
$
0.4486
$
0.7014
$
0.575
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2012 and 2011
(In thousands)
2012
2011
Cash flows from operating activities:
Net income
$
90,092
$
49,046
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization (including amounts in discontinued
operations)
164,636
51,759
Amortization of deferred revenue and lease intangibles, net
(5,160
)
(668
)
Other non-cash amortization
(10,108
)
2,513
Stock-based compensation
4,834
4,016
Straight-lining of rental income, net
(4,890
)
(1,772
)
Loss (gain) on real estate loan investments
559
(177
)
Gain on sale of marketable securities
-
(733
)
Change in fair value of financial instruments
33
-
Loss on extinguishment of debt
29,544
16,520
Net gain on sale of real estate assets (including amounts in
discontinued operations)
(40,233
)
-
Income tax expense (benefit) (including amounts in discontinued
operations)
11,305
(3,197
)
(Income) loss from unconsolidated entities
(317
)
170
Other
3,049
398
Changes in operating assets and liabilities:
Decrease (increase) in other assets
1,275
(1,540
)
Increase in accrued interest
20,452
15,253
Decrease in accounts payable and other liabilities
(20,110
)
(819
)
Net cash provided by operating activities
244,961
130,769
Cash flows from investing activities:
Net investment in real estate property
(500
)
-
Purchase of noncontrolling interest
-
(3,319
)
Investment in loans receivable
(22,473
)
-
Proceeds from sale of marketable securities
-
23,050
Proceeds from real estate disposals
8,847
-
Proceeds from loans receivable
17,244
19,950
Development project expenditures
(31,274
)
(131
)
Capital expenditures
(10,019
)
(7,832
)
Other
(2,137
)
(37
)
Net cash (used in) provided by investing activities
(40,312
)
31,681
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities
(382,398
)
(32,000
)
Proceeds from debt
667,330
14,630
Repayment of debt
(298,801
)
(331,069
)
Payment of deferred financing costs
(1,793
)
(314
)
Issuance of common stock, net
-
299,926
Cash distribution to common stockholders
(179,253
)
(93,738
)
Cash distribution to redeemable OP unitholders
(1,112
)
-
Purchases of redeemable OP units
(233
)
-
Distributions to noncontrolling interest
(1,592
)
(349
)
Other
565
458
Net cash used in financing activities
(197,287
)
(142,456
)
Net increase in cash and cash equivalents
7,362
19,994
Effect of foreign currency translation on cash and cash equivalents
55
93
Cash and cash equivalents at beginning of period
45,807
21,812
Cash and cash equivalents at end of period
$
53,224
$
41,899
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments
$
54,881
$
-
Utilization of escrow funds held for an Internal Revenue Code
Section 1031 exchange
(37,799
)
-
Other assets acquired
(5,126
)
-
Debt assumed
17,734
-
Other liabilities
(6,989
)
-
Noncontrolling interests
(3,115
)
-
Equity issued
4,326
-
QUARTERLY CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2012 First
2011 Quarters
Quarter
Fourth
Third
Second
First
Cash flows from operating activities:
Net income
$
90,092
$
192,497
$
101,984
$
19,734
$
49,046
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization (including amounts in discontinued
operations)
164,636
166,163
161,027
80,755
51,759
Amortization of deferred revenue and lease intangibles, net
(5,160
)
(4,701
)
(5,908
)
(882
)
(668
)
Other non-cash amortization
(10,108
)
(7,734
)
(8,568
)
626
2,513
Stock-based compensation
4,834
5,750
5,228
4,352
4,016
Straight-lining of rental income, net
(4,890
)
(5,631
)
(5,505
)
(1,977
)
(1,772
)
Loss (gain) on real estate loan investments
559
-
-
(3,078
)
(177
)
Gain on sale of marketable securities
-
-
-
-
(733
)
Change in fair value of financial instruments
33
61
11,785
(8,887
)
-
Loss on extinguishment of debt
29,544
2,393
8,685
6
16,520
Net gain on sale of real estate assets (including amounts in
discontinued operations)
(40,233
)
-
-
-
-
Income tax expense (benefit) (including amounts in discontinued
operations)
11,305
(7,827
)
(13,906
)
(6,207
)
(3,197
)
(Income) loss from unconsolidated entities
(317
)
(19
)
(182
)
83
170
Other
3,049
2,442
1,315
291
398
Changes in operating assets and liabilities:
Decrease (increase) in other assets
1,275
27,433
(17,069
)
(8,400
)
(1,540
)
Increase (decrease) in accrued interest
20,452
(28,291
)
15,133
(11,245
)
15,253
(Decrease) increase in accounts payable and other liabilities
(20,110
)
(13,240
)
3,582
(9,640
)
(819
)
Net cash provided by operating activities
244,961
329,296
257,601
55,531
130,769
Cash flows from investing activities:
Net investment in real estate property
(500
)
(186,918
)
(80,223
)
(264,464
)
-
Purchase of noncontrolling interest
-
-
-
-
(3,319
)
Investment in loans receivable
(22,473
)
(8,274
)
(6,934
)
(612,925
)
-
Proceeds from sale of marketable securities
-
-
-
-
23,050
Proceeds from real estate disposals
8,847
5,657
14,961
-
-
Proceeds from loans receivable
17,244
81,245
6,571
112,413
19,950
Development project expenditures
(31,274
)
(24,358
)
(17,546
)
(5,556
)
(131
)
Capital expenditures
(10,019
)
(21,815
)
(15,109
)
(5,717
)
(7,832
)
Other
(2,137
)
(52
)
(38
)
(38
)
(37
)
Net cash (used in) provided by investing activities
(40,312
)
(154,515
)
(98,318
)
(776,287
)
31,681
Cash flows from financing activities:
Net change in borrowings under revolving credit facilities
(382,398
)
103,452
334,500
131,500
(32,000
)
Proceeds from debt
667,330
385,887
253,642
689,481
14,630
Repayment of debt
(298,801
)
(493,919
)
(557,616
)
(6,358
)
(331,069
)
Payment of deferred financing costs
(1,793
)
(18,142
)
(535
)
(1,049
)
(314
)
Issuance of common stock, net
-
(79
)
-
-
299,926
Cash distribution to common stockholders
(179,253
)
(166,114
)
(152,983
)
(108,211
)
(93,738
)
Cash distribution to redeemable OP unitholders
(1,112
)
1,679
(4,038
)
-
-
Purchases of redeemable OP units
(233
)
(185
)
-
-
-
Contributions from noncontrolling interest
-
-
2
-
-
Distributions to noncontrolling interest
(1,592
)
(559
)
(1,381
)
(267
)
(349
)
Other
565
1,472
104
455
458
Net cash (used in) provided by financing activities
(197,287
)
(186,508
)
(128,305
)
705,551
(142,456
)
Net increase (decrease) in cash and cash equivalents
7,362
(11,727
)
30,978
(15,205
)
19,994
Effect of foreign currency translation on cash and cash equivalents
55
52
(198
)
8
93
Cash and cash equivalents at beginning of period
45,807
57,482
26,702
41,899
21,812
Cash and cash equivalents at end of period
$
53,224
$
45,807
$
57,482
$
26,702
$
41,899
Supplemental schedule of non-cash activities:
Assets and liabilities assumed from acquisitions:
Real estate investments
$
54,881
$
(61,527
)
$
7,893,696
$
3,140,924
$
-
Utilization of escrow funds held for an Internal Revenue Code
Section 1031 exchange
(37,799
)
-
-
-
-
Other assets acquired
(5,126
)
162,497
320,957
110,722
-
Debt assumed
17,734
142,863
1,886,585
1,621,641
-
Other liabilities
(6,989
)
(39,843
)
791,160
200,962
-
Deferred income tax liability
-
-
(4,198
)
48,087
-
Redeemable OP unitholder interests
-
458
100,430
-
-
Noncontrolling interests
(3,115
)
(2,510
)
83,702
-
-
Equity issued
4,326
2
5,356,974
1,380,956
-
QUARTERLY FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(In thousands, except per share amounts)
2012 First
2011 Quarters
Quarter
Fourth
Third
Second
First
Net income attributable to common stockholders
$
90,626
$
192,948
$
102,885
$
19,676
$
48,984
Adjustments:
Depreciation and amortization on real estate assets
162,295
163,058
157,717
79,463
50,728
Depreciation on real estate assets related to noncontrolling
interest
(1,511
)
(1,744
)
(1,313
)
(210
)
(204
)
Depreciation on real estate assets related to unconsolidated
entities
2,175
2,339
2,247
931
1,035
Discontinued operations:
Gain on sale of real estate assets
(40,233
)
-
-
-
-
Depreciation and amortization on real estate assets
1,439
2,471
2,686
709
445
FFO
214,791
359,072
264,222
100,569
100,988
Merger-related expenses and deal costs
7,981
22,317
69,350
55,807
6,449
Litigation proceeds, net
-
(116,932
)
(85,327
)
-
-
Loss on extinguishment of debt
29,544
2,393
8,685
6
16,520
Income tax expense (benefit)
11,305
(7,827
)
(13,904
)
(6,209
)
(3,197
)
Change in fair value of financial instruments
33
61
11,785
(8,887
)
-
Amortization of other intangibles
256
255
256
255
256
Normalized FFO
$
263,910
$
259,339
$
255,067
$
141,541
$
121,016
Per diluted share (1):
Net income attributable to common stockholders
$
0.31
$
0.66
$
0.35
$
0.11
$
0.30
Adjustments:
Depreciation and amortization on real estate assets
0.56
0.56
0.54
0.45
0.31
Depreciation on real estate assets related to noncontrolling
interest
(0.01
)
(0.01
)
(0.00
)
(0.00
)
(0.00
)
Depreciation on real estate assets related to unconsolidated
entities
0.01
0.01
0.01
0.01
0.01
Discontinued operations:
Gain on sale of real estate assets
(0.14
)
-
-
-
-
Depreciation and amortization on real estate assets
0.00
0.01
0.01
0.00
0.00
FFO
0.74
1.24
0.91
0.57
0.62
Merger-related expenses and deal costs
0.03
0.08
0.24
0.31
0.04
Litigation proceeds, net
-
(0.40
)
(0.29
)
-
-
Loss on extinguishment of debt
0.10
0.01
0.03
0.00
0.10
Income tax expense (benefit)
0.04
(0.03
)
(0.05
)
(0.03
)
(0.02
)
Change in fair value of financial instruments
0.00
0.00
0.04
(0.05
)
-
Amortization of other intangibles
0.00
0.00
0.00
0.00
0.00
Normalized FFO
$
0.91
$
0.89
$
0.88
$
0.80
$
0.75
(1) Per share amounts may not add due to rounding.
Historical cost accounting for real estate assets implicitly assumes
that the value of real estate assets diminishes predictably over time.
Since real estate values instead have historically risen or fallen with
market conditions, many industry investors have considered presentations
of operating results for real estate companies that use historical cost
accounting to be insufficient by themselves. To overcome this problem,
the Company considers FFO and normalized FFO appropriate measures of
operating performance of an equity REIT. Moreover, the Company believes
that normalized FFO provides useful information because it allows
investors, analysts and Company management to compare the Company's
operating performance to the operating performance of other real estate
companies and between periods on a consistent basis without having to
account for differences caused by unanticipated items such as
transactions and litigation. The Company uses the NAREIT definition of
FFO. NAREIT defines FFO as net income, computed in accordance with GAAP,
excluding gains (or losses) from sales of real estate property and
impairment write-downs of depreciable real estate, plus real estate
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures will be calculated to reflect FFO on the
same basis. The Company defines normalized FFO as FFO excluding the
following income and expense items (which may be recurring in nature):
(a) gains and losses on the sales of real property assets, (b)
merger-related costs and expenses, including amortization of intangibles
and transition and integration expenses, and deal costs and expenses,
including expenses and recoveries relating to the Company's lawsuit
against HCP, Inc., (c) the impact of any expenses related to asset
impairment and valuation allowances, the write-off of unamortized
deferred financing fees, or additional costs, expenses, discounts,
make-whole payments, penalties or premiums incurred as a result of early
retirement or payment of the Company's debt, (d) the non-cash effect of
income tax benefits or expenses, (e) the impact of future acquisitions
or divestitures (including pursuant to tenant options to purchase) and
capital transactions, (f) the financial impact of contingent
consideration, (g) charitable donations made to the Ventas Charitable
Foundation, and (h) gains and losses for non-operational foreign
currency hedge agreements and changes in the fair value of financial
instruments.
FFO and normalized FFO presented herein are not necessarily identical to
FFO and normalized FFO presented by other real estate companies due to
the fact that not all real estate companies use the same definitions.
FFO and normalized FFO should not be considered as alternatives to net
income (determined in accordance with GAAP) as indicators of the
Company's financial performance or as alternatives to cash flow from
operating activities (determined in accordance with GAAP) as measures of
the Company's liquidity, nor are FFO and normalized FFO necessarily
indicative of sufficient cash flow to fund all of the Company's needs.
The Company believes that in order to facilitate a clear understanding
of the consolidated historical operating results of the Company, FFO and
normalized FFO should be examined in conjunction with net income as
presented elsewhere herein.
NORMALIZED FFO GUIDANCE FOR THE YEAR ENDING DECEMBER 31, 2012
The following table illustrates the Company's normalized FFO per diluted
common share guidance for the year ending December 31, 2012:
GUIDANCE
For the Year
Ending
December 31, 2012
Net income attributable to common stockholders
$
1.08
-
$
1.23
Adjustments:
Depreciation and amortization on real estate
assets, depreciation related to noncontrolling interest
and gain/loss on sale of real estate assets, net
2.21
-
2.14
FFO
3.29
-
3.37
Adjustments:
Income tax benefit/expense, gain/loss on
extinguishment of debt, transition and
integration expenses, amortization of
intangibles, merger-related expenses and deal
costs and certain derivative transactions
0.34
-
0.32
Normalized FFO
$
3.63
-
$
3.69
Net Debt to Adjusted Pro Forma EBITDA
The following information considers the pro forma effect on net income,
interest and depreciation of the Company's investments and other capital
transactions that were completed during the three months ended March 31,
2012, as if the transactions had been consummated as of the beginning of
the period. The following table illustrates net debt to pro forma
earnings before interest, taxes, depreciation and amortization
(including non-cash stock-based compensation expense), excluding loss on
extinguishment of debt, net litigation proceeds, merger-related expenses
and deal costs, gains or losses on sales of real property assets and
changes in the fair value of financial instruments (including amounts in
discontinued operations) ("Adjusted Pro Forma EBITDA") (dollars in
thousands):
Net income attributable to common stockholders
$
90,626
Pro forma adjustments for current period investments, capital
transactions and dispositions
989
Pro forma net income for the three months ended
March 31, 2012
$
91,615
Add back:
Pro forma interest (including discontinued operations)
69,921
Pro forma depreciation and amortization (including discontinued
operations)
164,996
Stock-based compensation
4,834
Loss on extinguishment of debt
29,544
Gain on sale of real estate assets
(40,233
)
Income tax expense (including discontinued operations)
11,305
Change in fair value of financial instruments
33
Other taxes
965
Merger-related expenses and deal costs
7,981
Adjusted Pro Forma EBITDA
$
340,961
Adjusted Pro Forma EBITDA annualized
$
1,363,844
As of March 31, 2012:
Debt
$
6,430,364
Cash, including cash escrows pertaining to debt
(66,475
)
Net debt
$
6,363,889
Net debt to Adjusted Pro Forma EBITDA
4.7
x
Non-GAAP Financial Measures Reconciliation
NOI Reconciliation by Segment
(In thousands)
2012 First
2011 Quarters
Quarter
Fourth
Third
Second
First
Revenues
Triple-Net
Triple-Net Rental Income
$
209,509
$
208,607
$
206,803
$
118,099
$
116,574
Medical Office Buildings
Medical Office - Stabilized
56,438
54,034
52,194
20,280
20,810
Medical Office - Lease up
8,258
6,543
6,167
3,478
3,426
Total Medical Office Buildings - Rental Income
64,696
60,577
58,361
23,758
24,236
Total Rental Income
274,205
269,184
265,164
141,857
140,810
Medical Office Building Services Revenue
4,499
9,313
8,162
9,822
6,957
Total Medical Office Buildings - Revenue
69,195
69,890
66,523
33,580
31,193
Triple-Net Services Revenue
1,109
1,108
1,109
-
-
Total Medical Office Building and Other Services Revenue
5,608
10,421
9,271
9,822
6,957
Seniors Housing Operating
Seniors Housing - Stabilized
271,396
264,860
265,649
194,015
113,227
Seniors Housing - Lease up
13,078
11,866
7,410
6,025
-
Seniors Housing - Other
1,321
1,266
1,235
1,267
1,275
Total Resident Fees and Services
285,795
277,992
274,294
201,307
114,502
Non-Segment Income from Loans and Investments
8,036
9,867
10,072
8,391
6,085
Total Revenues, excluding Interest and Other Income
573,644
567,464
558,801
361,377
268,354
Property-Level Operating Expenses
Medical Office Buildings
Medical Office - Stabilized
18,037
17,799
17,834
6,820
7,281
Medical Office - Lease up
3,053
2,505
2,426
1,458
1,395
Total Medical Office Buildings
21,090
20,304
20,260
8,278
8,676
Seniors Housing Operating
Seniors Housing - Stabilized
184,748
177,890
179,983
129,901
76,952
Seniors Housing - Lease up
9,795
9,803
6,218
4,825
-
Seniors Housing - Other
1,123
1,097
1,155
1,168
1,159
Total Seniors Housing
195,666
188,790
187,356
135,894
78,111
Total Property-Level Operating Expenses
216,756
209,094
207,616
144,172
86,787
Medical Office Building Services Costs
2,988
7,245
6,347
7,954
5,536
Net Operating Income
Triple-Net
Triple-Net Properties
209,509
208,607
206,803
118,099
116,574
Triple-Net Services Revenue
1,109
1,108
1,109
-
-
Total Triple-Net
210,618
209,715
207,912
118,099
116,574
Medical Office Buildings
Medical Office - Stabilized
38,401
36,235
34,360
13,460
13,529
Medical Office - Lease up
5,205
4,038
3,741
2,020
2,031
Medical Office Buildings Services
1,511
2,068
1,815
1,868
1,421
Total Medical Office Buildings
45,117
42,341
39,916
17,348
16,981
Seniors Housing Operating
Seniors Housing - Stabilized
86,648
86,970
85,666
64,114
36,275
Seniors Housing - Lease up
3,283
2,063
1,192
1,200
-
Seniors Housing - Other
198
169
80
99
116
Total Seniors Housing
90,129
89,202
86,938
65,413
36,391
Non-Segment
8,036
9,867
10,072
8,391
6,085
Net Operating Income
$
353,900
$
351,125
$
344,838
$
209,251
$
176,031
Note: Amounts above are adjusted to exclude discontinued
operations for all periods presented.
Non-GAAP Financial Measures Reconciliation
Same-store NOI Reconciliation by Segment
(Dollars in thousands)
For the Three Months Ended
March 31,
2012
2011
Triple-Net Properties
Triple-Net Rental Income
$
209,509
$
116,574
Rental Income Included in Discontinued Operations
2,762
2,030
Less:
Rental Income not Included in Same-Store
86,053
2,018
Straight-Lining of Rental Income, net
1,814
1,076
Non-Cash Rental Income
6,097
158
Other Pro Forma Adjustments
-
(13
)
93,965
3,240
Triple-Net Same-Store NOI
$
118,306
$
115,364
Net Operating Income
Triple-Net Same-Store NOI
118,306
115,364
Total Seniors Housing
90,129
36,391
Total Medical Office Buildings
45,117
16,981
Less:
MOB Noncontrolling Interest Portion of NOI Included in Same-Store
367
386
MOB Cash NOI not Included in Same-Store
26,526
-
Medical Office Building and Other Services NOI
1,511
1,421
Straight-Lining of Rental Income
2,533
695
Non-Cash Rental Income
(341
)
313
Seniors Housing NOI not Included in Same-Store
51,209
-
Other Pro Forma Adjustments
60
-
Same-Store Cash NOI
$
171,687
$
165,920
Percentage Increase
3.5
%
Same-Store Cash NOI
$
171,687
$
165,920
Pro Forma NOI with management fee adjustment
-
2,689
Same-Store NOI with management fee adjustment
$
171,687
$
163,231
Percentage Increase
5.2
%
The Company believes that NOI and same-store cash NOI provide useful
information because those disclosures allow investors, analysts and
Company management to measure unlevered property-level operating results
and to compare the Company's operating results to the operating results
of other real estate companies and between periods on a consistent
basis. Those terms are commonly used in evaluating results of real
estate companies. The Company defines NOI as total revenues, excluding
interest and other income, less property-level operating expenses and
medical office building services costs (including amounts in
discontinued operations).
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